New Home Building Hits 7-year Low

By January 23, 2020 Market Update

Low supply of homes at a time of rising demand is putting upward pressure on dwelling prices in many parts of Australia.

The latest ABS figures show that the number of new homes started in the September 2019 Quarter was the lowest in seven years.

Master Builders chief economist Shane Garrett says the official figures show that new home building starts suffered an 11.7% reduction during the September Quarter, hitting the lowest level since early in 2013.

Geordan Murray, HIA senior economist, says new homes commenced were not only down 11.7% quarter-by-quarter, but were 27% lower than a year earlier.

The fall in new home starts was more pronounced in the high-density part of the market where a 22% decline occurred in the September Quarter. Murray says the decline in apartment construction was most pronounced in Melbourne and Sydney, with building levels 39% lower than a year ago.

Garrett suggests this was due to a number of one-off factors including the “reputational issues around apartments” during the middle of last year as well as the adverse fall-out from the banking Royal Commission.

Residential vacancy rates are low in most major markets around Australia – including in many regional areas – and the number of listings of properties for sale is also at a low level, declining 12% in December compared to a year earlier.

This helps to explain why prices rose noticeably in most capital cities and in most state regional markets in the latter part of 2019.

But market conditions may prompt a revival in new building in the near future.

“The latest indicators around building approvals and house prices do suggest that a resumption of growth in new home building is not too far off,” Garrett says.

Murray agrees. “The second half of 2019 saw a marked improvement in housing market sentiment and leading indicators suggest that demand for new homes has stabilised,” he says. “The improved market conditions mean that it has become less likely that the substantial declines in new home starts that characterised 2019 will continue into 2020.”

About The Author
Terry Ryder

Terry Ryder

Terry Ryder has been a specialist researcher/writer on residential property for 32 years and has published four books. In 2006 he created hotspotting.com.au, to help investors find the best places to buy. He is regularly interviewed by television, radio and print media on real estate issues, and is widely sought as a public speaker.

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